A 'To-Do' List when deciding on Industrial Real Estate
Choosing an industrial property can be overwhelming if you have not done your homework. The following steps can help make the process easier. Negotiations with property owners can go smoother and be more productive if you already know what improvements you need and how much they will cost. Here are some general terms you should know before negotiating on a prospective site:
- Zoning (Allowable Use)- Find out what restrictions the city may have for your type of business. Make sure to get a copy of the zoning map and list of allowable uses before you engage a property owner for negotiations.
- Parking Requirements- Ask the city if your use would draw any special parking requirements. Nothing worst than spending months negotiating a deal, and finding out the site will not work due to parking.
- Fire Department Requirements- The fire department may have special fire suppression requirements that will be specific for your use, the size of the building, the type of material you will be storing or racking configurations. The Fire Department could require you to have a fire suppression system in the racking system. Consult with a professional to determine how much these changes will cost.
- Tax Incentives- Does your city or state have any tax breaks for manufacturing. Tax breaks for the number of jobs your company will bring to the area. Consult with the city or state's Economic Development office to see if there are funds available to your company.
- Landlord's Allowable Use- Be detailed when describing your use to a potential property owner. Think of it like a relationship, how would you feel if a partner was purposely lying to you, or being deceptive so that they can gain your acceptance.
- Clear Height & Stacking- How high do you need to go? I recommend go as high as you can go depending upon your market. Certain markets have older product where the clear height is in the 12' range. Other markets have the newest product where you can take advantage of 32' range. The higher you can stack the cheaper your rent will be. Rent is usually determined by the amount of square feet in the building, not by the cubic feet. Use all of the cubic feet you can.
- Topography of Floor-If you are stacking boxes or crates with a forklift, you must determine the flatness of the floor. An incline could be problematic when trying to operate a forklift or stacking high.
- Power Requirements-Always consult with your electrician regarding any special electrical requirements. Make sure to have your electrician inspect the electrical panels of the prospective property that you are interested in to make sure that the advertised power is serviced into the building.
- Yard- Do you have an outside storage need? Can you store all your product outside? If so, it would make more economic sense to lease a yard since it is usually cheaper to lease than a warehouse.
- Multi-Tenant versus Single Tenant-Is your use best in a single tenant building due to possible noise complaints? Is your use compatible with close neighbors? If you believe a Multi-Tenant building is good fit; make sure that you are comfortable with the uses in the Multi-Tenant Park.
- Freeway Access For Employees & Service Vehicles-Is the prospective property easy to access? Is the property close to known traffic jams? The easier to access the cheaper your transportation cost should be.
- Loading Requirements-Make sure to understand the size of the trucks that will be making deliveries to your business. Make sure the prospective property can accommodate with easy ingress and egress. If the trucks need to enter the warehouse area, be sure the loading door is tall and wide enough to allow access. Also determine if you need truck high doors, dock high doors, load levelers and interior loading for security. Keep in mind you will be paying rent for interior loading area. Inspect the ground level loading, does it works? Make sure they can accommodate your need. Know how many doors you need.
- Office Space- Work with a space planner on how much office space you will need and if you need to make any alterations to the existing offices. Make sure to get a couple of contractors to bid the work so that you understand the costs that are involved.
- Financials-Have your financial information ready to show the property owner. There was flexibility on this item before the 'Credit Crisis'. However, now this is mandatory 95% of the time. Typical financial information requested are 3 years of tax returns, profit & loss statement and balance sheet.
- Pick a Professional- There are specialties in every real estate field. A broker specializing in industrial real estate can lead a buyer or lessee in the right direction. Most industrial brokers have the expertise to help guide you in the decision making process. Interview a couple of agents and pick the one that best understands your needs. By picking one broker, you will get better service than if you try the 'turn & burn' approach of having multiple agents run with your requirement. It usually ends up creating confusion in the market and is counter productive.
I hope this information is helpful. Please feel to message me with any questions.
Best Regards, Brandon Carrillo, Principal, Lee & Associates, License#01745362
Experience Leads to Success with over 25 years of Management experience.
4yThat’s a good list Brandon. Most don’t ever get that much detail until they are deep into a long lease or even worse, a purchase.